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Corporate Governance Report

Updated on: August 3, 2020

ADVANTEST CORPORATION

Yoshiaki Yoshida

Representative Director, President and CEO

Contact: Atsushi Fujita

Director, Managing Executive Officer &

Executive Vice President, Corporate Administration Group

https://www.advantest.com/

This is an English translation of the Corporate Governance Report of Advantest Corporation updated on

June 26, 2020.

The corporate governance of Advantest Corporation (“Advantest”) is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic

Information

<I - 1. Basic Views>

Advantest’s corporate mission is “Enabling Leading-Edge Technologies”. Advantest constantly strives to

improve so that we can offer products and services that will satisfy customers around the world, and

contribute to the future of society through the development of the most advanced technologies.

In accordance with the corporate mission described in the preceding paragraph, and in response to our

mandate from stakeholders, Advantest aims to achieve a sustainable level of business development for the

Advantest Group and to enhance corporate value over the mid-to-long term. To that end, the Advantest

Group will establish a fair and efficient and transparent governance system. Above is a basic view on the

Advantest Group’s corporate governance.

Advantest discloses our Corporate Governance Basic Policy at the following website.

(https://www.advantest.com/investors/management-policy/corporate-governance)

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

Principle 2.6: Roles of Corporate Pension Fund as Asset Owners

The Advantest group's retirement pension system employs a mixed-type system of "defined benefit corporate

pension (DB)" and "defined contribution pension (DC)".

Advantest and its domestic group operate the pension fund through the Advantest Corporation Pension Fund.

In order to avoid excessive risk management and speculative operation in investment management of corporate

pension funds, the Advantest Corporation Pension Fund has set out a basic policy on pension fund management.

The planned appointment of personnel with appropriate qualifications for operation is a future task. Under the

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defined benefit corporate pension plan, the Advantest Corporation Pension Fund continues to confirm risks of

assets and financial products that the Advantest Corporation Pension Fund is considering purchasing while

receiving advice from experts. In addition, with regard to the directors that constitute the Board of Directors of the

Advantest Corporation Pension Fund, which is the body that deliberates the execution of business by the

Advantest Corporation Pension Fund, by making equal the number of directors that Advantest chooses and the

number of those elected by the subscriber side, the Advantest Corporation Pension Fund ensures that conflict of

interest which could arise between the Advantest Corporation Pension Fund beneficiaries and Advantest are

appropriately managed.

Regarding DC, Advantest provided an explanation to the beneficiaries when the fund was transferred to DC in

October 2018. Believing that it is necessary to continuously improve understanding of this system and asset

management, Advantest provided e-learning seminars regarding DC in FY2019.

In July 2020, the Advantest Corporate Pension Fund announced that it would reslove the Japanese version of the

Stewardship Code for institutional investors (asset owners) as an asset holder. Since the Fund entrusts asset

management to asset management companies rather than managing assets itself, it is responsible for ensuring that

the asset management companies comply with the Stewardship Code and for acting as an investor that contributes

to the sustainable growth of investee companies. Thereby, the Fund is seeking to increase the medium- to

long-term investment returns of the beneficiaries of the Fund.

Principle 4.1.3: Succession planning

Regarding the succession plan of CEO, the Board of Directors will take the initiative after considering in the

Nomination and Compensation Committee. Currently, we are working on the formulation of this plan, and the

Nomination and Compensation Committee will report progress to the Board of Directors. Regarding CEO

candidates, Advantest has started to consider this issue and progress will be reported to the Board of Directors and

the Nomination and Compensation Committee.

[Disclosure Based on the Principles of the Corporate Governance Code]

Principle 1.4: Strategic Shareholdings

In our Corporate Governance Report submitted on June 27, 2019, we disclosed that we held shares of two listed

companies as strategic shares and were promoting further reductions. The sale of all shares of these two listed

companies was completed in FY2019, and as of the date of June 26, 2020, we do not hold shares of listed

companies as strategic shares.

As for unlisted stock, we have multiple shares as strategic shares as of June 26, 2020. In addition to the purpose

of holding unlisted shares, we also verify the investment effects of major unlisted shares and report it to the

Board of Directors. In addition, the amount reported on the balance sheet is disclosed in our securities report.

Principle 1.7: Related Party Transactions

When Advantest engages in transactions with its directors, officers or major shareholders, the Board of Directors

shall discuss and approve such transactions beforehand, so as not to harm the interest of Advantest group or the

common interest of the shareholders, provided, however, that this shall not apply if the transaction conditions are

similar to general transactions.

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Principle3.1 i): Company objectives (e.g., business principle), business strategies and business plans

Principle 5.2: Establishing and Disclosing Business Strategies and Business Plans

Advantest’s corporate mission is "Enabling Leading-Edge Technologies"

Regarding our management strategy and management plan, Advantest established a Grand Design describing

what Advantest should do for the next 10 years from 2018. Advantest also established a mid-term management

plan for the next three years, both announced at Advantest’s 2017 fiscal year financial reporting.

Under our mid-term management plan, Advantest will manage sales, operating margin, ROE, and earnings per

share (EPS) in terms of KPI and will promote improvement of P/L and efficient utilization of capital. Numerical

targets of this mid-term management plan are net sales of 250 billion yen, operating profit ratio of 17%, ROE of

18% and EPS of 170 yen (3-year average figures) under our base scenario. Advantest also has a conservative

scenario of net sales of 230 billion yen, operating profit ratio of 15%, ROE of 15% and EPS of 135 yen.

Advantest has introduced business management and evaluation tools based on ROIC (return on invested capital

ratio). Advantest intends to strengthen our business management by developing the use of these tools.

Details are published on our website.

https://www.advantest.com/investors/management-policy/mid-long-term-management-policy

In FY 2019, we achieved results that exceeded our base scenario.

Principle3.1 ii): Basic views and guidelines on corporate governance based on each principle of the Code

Based on our corporate mission of "Enabling Leading-Edge Technologies", our basic concept of corporate

governance is to respond to the mandate from stakeholders, the Advantest aims to achieve a sustainable level of

business development of the Advantest group and to enhance corporate value over the mid-to-long term.. Our

corporate governance basic policy (refer to the following URL) was established with this aim.

https://www.advantest.com/ja/investors/management-policy/mid-long-term-management-policy

Principle3.1 iii): Board policies and procedures in determining the remuneration of the senior management and

directors

Compensation for Directors and Executive Officers is described in "Directors and Executive Officers

Compensation Policy and Procedure" as follows. Regarding detailed items of the compensation, please refer to

the “Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods” below.

“Directors and Executive Officers Executive Compensation Policy and Procedure”

1. Purpose

The Board of Directors establishes this Policy and Procedure so that the Directors and Executive Officers

Compensation shall be determined to make it effective for a sustainable level of business development and

mid-to-long term enhancement of corporate value, to share the shareholders’ perspective, and to secure and

motivate superior human resources who manage Advantest group;

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2. Structure and Policy in Determination

The Compensation for Directors (excluding Directors who are Audit and Supervisory Committee members)

and Executive Officers is comprised of (1) Fixed-Compensation, (2) Performance-linked Bonus and (3)

Stock Compensations, to contribute for the purpose written in 1. The amounts and ratios are set in

appropriate levels.

The Compensation for Independent Directors is comprised only of (1) fixed-compensation, by considering

their roles and independence from the management.

(1) Fixed-Compensation is determined an appropriate level by referring the market data, and the position

and responsibilities.

(2) Performance-linked Bonus is an incentive for short-term performance, and to be calculated based on the

consolidated financial results of Net Sales, Operating Income Ratio, Net Income , and ROE etc..

(3) Stock Compensations are incentives for long term performance and also to share the shareholders’

perspective. Both of “Stock Option” and “Performance-based Stock Remuneration” will be granted by

considering Advantest performance trend, economic situations, stock price in the market and like. The

vested stocks by "Performance-based Stock Remuneration" will be fluctuated by the consolidated

financial results of Net Sales, Operating Income Ratio, Net Income, and ROE etc..

3. Procedures in Determination

In response to consultation from the Board of Directors, the Nomination and Compensation Committee

deliberates and proposes the Compensation for Directors (excluding Directors who are Audit and

Supervisory Committee members) and Executive Officers to the Board of Directors. The Board of

Directors deliberates and determines the compensation based on the proposal from the Nomination and

Compensation Committee.

The Audit and Supervisory Committee deliberates and determines the compensation for Directors who are

Audit and Supervisory Committee members.

Principle3.1 iv): Board Policies and procedures for the appointment of senior management and the nomination of

director candidates

“Directors and Executive Officers Nomination/Dismissal Policy and Procedures”

1. Basic Policy for Nomination

Advantest’s basic policy is to nominate persons who can contribute to achieve a sustainable level of business

development and mid-to-long term enhancement of corporate value, and who have the following qualities.

Detailed appointment criteria will be considered in addition to the following criteria.

- A person who respects the management philosophy of the Advantest group and has excellent personality

and insight

- A person who has a good understanding of the Advantest group's history, corporate culture, employee

characteristics, etc. and has sufficient experience and knowledge about the business

- A person who, based on the business environment and competitive trends affecting the Advantest group,

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can provide concrete proposals on management strategies, implementation plans, etc. that can contribute

to achieve a sustainable level of business development and mid-to-long term enhancement of corporate

value, and who can constantly examine and continue efforts to enhance it

- A person who can sensitively perceive changes in the market related to the Advantest group’s industry and

the value to be offered, and who can constructively discuss the direction the Advantest group should

move forward

2. Detailed Appointment Criteria

(1) Directors (excluding Directors who are Audit and Supervisory Committee members)

The candidate should meet excellent experience, ability, leadership, mid-to-long term foresight and

strong ethical values as a person who make decisions on the Advantest 's management and supervise

business operations. Personality, experience, years of appointment as Directors of Advantest and like

will be considered in addition to the criteria.

(2) Independent Directors (excluding Directors who are Audit and Supervisory Committee members)

The candidate should fulfill “Independence Standards for Independent Directors” and should meet

one or more of the below criteria. Personality, concurrent positions as another company’s director,

executive officer or auditor, years of appointment as an Independent Director of Advantest and the

like will be considered in addition to the criteria.

- a legal professional such as attorneys

- a person who has management experience for another company

- a person who has excellent knowledge and experience in finance or accounting

- a person who has excellent knowledge and experience in the Advantest’s business field

- a person who has wide and deep experience in R&D

- a person who has enough experience or ability equivalent to above persons

(3) Directors who are Audit and Supervisory Committee members

The candidate should fulfill and should meet one or more of the below criteria. Personality,

concurrent positions as another company’s director, executive officer or auditor, years of

appointment as Directors of Advantest and like will be considered in addition to the criteria.

- a person who worked at Advantest as a Director, an Executive Officer, or an employee in

Corporate Administration area or Internal Audit group.

- a legal professional such as attorneys

- a person who has management experience for another company

- a person who has excellent knowledge and experience in finance or accounting

- a person who has excellent knowledge and experience in the Advantest’s business field

- a person who has wide and deep experience in R&D

- a person who has enough experience or ability equivalent to above persons

(4) Representative Director, Chairman of the Board, Vice Chairman of the Board

For Representative Director, Advantest will select the person best suited to lead the Advantest group

from among the Directors appointed at the General Meeting of Shareholders. Advantest also can

select the Chairman of the Board who convenes the Board and act as the chairperson, and the Vice

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Chairman of the Board who supports the Chairman of the Board, among the Directors.

(5) Executive Officer

The candidate should meet excellent experience, ability, leadership, as a person who has

responsibility for business operations. Personality and like will be considered in addition to the

criteria. Also, as the President and CEO, Advantest will select the person best suited to lead the

Advantest group from among the Executive Officers. Advantest also can select Corporate Vice

Presidents, Senior Executive Officers and Managing Executive Officers.

3. Dismissal criteria of Directors and/or Executive Officers

If any one of the following criteria applies, an individual is subject to dismissal proposal.

- In the case of violating laws, articles of association, or other rules of the Advantest group,

causing a significant loss or operational obstruction to the Advantest group

- When it becomes clear that the individual lacks the qualifications stipulated in the appointment of

Directors and/or Executive Officers or selection criteria

- In the event of a significant downturn in the Advantest group's business performance (Applicable

only to a President and CEO, and a Representative Director)

- In the event of serious business slump in the responsible business or the area of responsibility

(Only for Executive Officers)

- When a relationship with antisocial forces is recognized

- When conduct runs contrary to public order and morals

- If there is a serious obstacle to the performance of duties due to health reasons etc.

4. Procedures for the Nomination

The Nomination and Compensation Committee deliberates and proposes nomination recommendations for

Directors and Executive Officers to the Board of Directors. Based on the Committee’s proposal, the Board of

Directors determines the agenda item regarding the election of Directors to be resolved at the General

Meeting of Shareholders and submit it to the General Meeting of Shareholders.

In appointing Executive Officers, the Nomination and Compensation Committee proposes to the Board of

Directors. The Board of Directors deliberates the proposal from the Nomination and Compensation

Committee and appoints Executive Officers.

Regarding the Representative Director, Chairman of the Board, Vice Chairman of the Board, President and

CEO, Corporate Vice President, Senior Executive Officer and Managing Executive Officer, the Board of

Directors deliberates and selects them based on the proposal of the Nomination and Compensation

Committee.

5. Procedures for Dismissal

When a report on the results of deliberations by the Nomination and Compensation Committee falls under

the dismissal criteria for Directors and/or Executive Officers or if there is a proposal for dismissal from

another Director, the Board of Directors will deliberate. When judging that an individual fall under the

dismissal criteria at the Board of Directors meeting, Advantest responds as follows:

- Representative Director, Chairman of the Board, Vice Chairman of the Board:

A person will be dismissed by the position

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- Directors:

Advantest will submit a proposal for dismissal of Directors to the Extraordinary General Meeting

of Shareholders.

- President and CEO, Corporate Vice President, Senior Executive Officer and Managing Executive

Officer:

An individual will be dismissed as the position.

- Executive officer:

Dismissed from the position of Executive Officer.

Principle 3.1 v): Explanations with respect to individual appointments and nominations based on iv)

Regarding the appointment of candidates for Directors who are not Audit and Supervisory Committee members,

and for Ms. Sayaka Sumida, please refer to the Convocation notice of the 78th Ordinary General Meeting of

Shareholders (Page 8-17), and for Mr. Yuichi Kurita and Mr. Kouichi Nanba please refer to the convocation

notice of 77th Ordinary General Meeting of Shareholders (Page15-17).

（https://www.advantest.com/investors/shares-and-corporate-bonds/shareholders-meeting）

Supplementary Principle 4.1.1: Roles and Responsibility of the Board

In principle, to make more flexible decision-making and prompt business management, decisions on business

execution other than matters deemed to be exclusive matters by the Board of Directors on the basis of laws and

regulations and the matter of important business execution Board of Director delegates to the president and CEO.

Executive officer meeting (Jomukai) composed of Executive Officers, will review important matters concerning

business execution.

From FY2017, Advantest reviewed the rules of the Board of Directors, delegated more authority to

representative directors (CEO), and at the Board of Directors, enhanced the report on the execution of duties by

the Executive Directors.

Principle 4.9: Independence Standards and Qualification for Independent Directors

It is stated in the “Independence Criteria of Independent Outside Directors” as follows;

“Independence Criteria of Independent Outside Directors”

Outside Directors of Advantest shall be judged to be independent when none of the following provided

conditions apply presently.

1. Major Business Partner

(1) Entity transacts with Advantest as Major Business Partner or Executive thereof

(2) Major Business Partner of Advantest or Executive thereof

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2.Expert

Consultant, Accountant or Lawyer who receives a large amount of money or other compensation from

Advantest. (In case that the receiver of such compensation is a legal entity or group such as union, the

person who belongs to such entity.)

3.Relative

(1) Relative of person who falls in the condition set forth in 1 or 2 above.

(2) Relative of Executive or Board Director of the subsidiary of Advantest

(3) Relative of person who was an Executive or Board Director of Advantest or subsidiary of Advantest

recently.

Notes:

*1 “Recently” shall mean a time range substantially identical to presently.

*2 “Major Business Partner” means a partner whose revenue from transactions with Advantest accounts

for a considerable part of their revenue, or a partner supplying Advantest with commodities or

services indispensable to Advantest’s business.

*3 “Executive” means the “executive” defined in the Ordinance for Enforcement of the Company Act.

*4 “Relative” means the person’s relative within the second degree of kinship.

Supplementary Principle 4.11.1: Concept of composition of the Board

Please refer to “the Principle3.1 iv) Board Policies and procedures for the appointment of senior management

and the nomination of director candidates” above.

Supplementary Principle 4.11.2: Directors served as directors, kansayaku or the management at other company

Regarding the status of important concurrent positions of outside director candidates and Directors, they are

announced in disclosure documents such as “convocation notice of ordinary General Meeting of Shareholders”

and business report.

Supplementary Principle 4.11.3: A summary of the results of the board meeting effectiveness

At a Board of Directors’ meeting, all directors answered a questionnaire to evaluate the effectiveness of their

roles and obligations. Advantest analyzed our organization, operation and discussion status by collecting

opinions.

(Result of FY2018 and action in FY2019)

Regarding board effectiveness in FY 2018, Advantest considered the following three items: succession plans of

the Representative Director, re-analysis of risks that influence our business, and investigation of the director

training menu.

Regarding the succession plans, please refer to “Principle 4.1.3 Succession planning in [Reasons for

Non-compliance with the Principles of the Corporate Governance Code].

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Regarding the re-analysis of risks, we described the risks in the securities report after discussions on the

executive side.

In relation to the investigation of the training menu, we newly appointed an outside director in FY 2019 who is

familiar with the training of directors. Executive Officers who had not attended the training have received officer

training on governance, and in addition, a lecture by an expert on ESG and improvement of corporate value for

domestic Directors and Executive Officers was held.

(Result of FY2019)

Regarding the effectiveness of the Board of Directors in FY 2019, it was confirmed that its structure is

appropriate, and the Board of Directors exchanged opinions freely. On the other hand, the following points were

raised regarding future improvements.

- Distributed materials and explanation methods of the Board of Directors

- Nomination and Compensation Committee reporting method

- How to utilize outside experts by outside directors

Supplementary Principle 4.14.2: Training policy for directors

It is stated in the “Director Training Policy” as follows;

“Director Training Policy”

1.Advantest provides and arranges following actions for new Directors to acquire necessary knowledge on

the Advantest’s business, finances, organizations and other matters so as to enhance their understanding of

their roles and responsibilities:

(1) To explain the roles and responsibility required for Directors;

(2) To explain Advantest group’s business, finances, organizations, major internal regulations, corporate

governance structure, and internal control systems;

(3) To update above (1) and (2) for incumbent Directors as necessary.

2. Advantest should provide and arrange training opportunities suitable for each director as necessary.

In FY2019, Advantest conducted training as follows.

- For a newly appointed director, Advantest explained Advantest group’s business, or organization etc.

- Executive Officers who had not attended the training prior to FY 2019 received officer training on

governance.

- A lecture by an expert on ESG and improvement of corporate value for domestic Directors and

Executive Officers was held.

Principle 5.1: Policy for Constructive Dialogue with Shareholders

It is stated in the “Basic Investor Relations Policy” as follows;

“Basic Investor Relations Policy”

Under the direction of our CEO, and in line with the Basic Investor Relations Policy expressed below,

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Advantest’s IR team promotes dialogue with its shareholders and investors as an essential aspect of

corporate value. Our commitment to open communication both ensures accountability to our stakeholders,

and plays an important role in growing our corporate value over the medium to long term.

1. Disclosure Policy

(1) Disclosure of Material Information

Advantest discloses material information as appropriate in a transparent and timely manner, in

compliance with Japan’s Financial Instruments and Exchange Act, the regulations of the stock

exchanges and other related laws and regulations (“Acts”).

Important information is defined as corporate information that must be disclosed in a timely manner

under the Acts when important matters concerning Advantest or its subsidiaries are determined or

when an important event occurs, and other corporate information requiring timely disclosure under

the Acts.

(2) Voluntary Disclosure

Advantest also discloses general corporate information other than material information, when we

deem it may have a material impact on the investment decisions of our shareholders and investors, as

rapidly and transparently as possible.

2. Disclosure Methods

To ensure our fair disclosure to shareholders and investors, material information is disclosed via the

methods stipulated by law and by the regulations of all the stock exchanges on which Advantest is listed,

both in Japan and overseas. Additionally, all such information is promptly posted on our corporate website.

Information falling outside the scope of material information is disclosed via news releases, at press

conferences and our quarterly information meetings, and is also posted on our website. We reserve the right

not to respond to enquiries regarding certain information related to competitiveness or privileged

information that Advantest has a duty to protect.

3. Forward-Looking Statements

In its disclosures, Advantest may make forward-looking statements that reflect management’s views with

respect to future plans, strategy, and financial performance. Such statements are based on information

available at the time of disclosure and are subject to various risks and uncertainties. To ensure that investors

are aware of these risks, Advantest’s disclosures are accompanied by cautionary statements.

4. Communication Structure

Advantest’s IR Section handles communications with shareholders and investors. In principle, all

Advantest’s IR communications go through our IR spokespersons—the CEO, CFO, Executive Vice

President and Senior Vice President in Corporate Planning & Stakeholder Relations Group and IR

personnel—but other executives, including Outside Directors, may also be appointed IR spokespersons in

certain cases through IR personnel, depending on individual requirements and the content to be

communicated. The IR section supports our IR spokespersons by liaising with other divisions and collating

relevant and specialized information to enhance our dialogue with shareholders and investors.

5. Comprehensive Communication

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In addition to our earnings announcements and postings on our public website, Advantest strives to

maximize shareholders’ and investors’ awareness of our business environment and management strategies

through individual meetings, site tours, segment-specific briefings, and other such opportunities for

communication.

6. Incorporation of Feedback Through Dialogue

Feedback and opinions received from shareholders and investors is shared at the Board of Directors, and

incorporated into our planning for a sustainable level of business development and mid-to-long term

enhancement of corporate value.

7. Management of Insider Information and Fairness in Disclosure

Advantest has defined internal rules for the prevention of insider trading, as explained in the sections of

Advantest’s “Code of Conduct” related to management of material information and executive buying and

selling of shares. Moreover, our IR spokespersons are consistently prudent in avoiding the disclosure of

material information and other sensitive information in conversation or other venues for communication,

where multiple personnel are typically present to check on one another.

8. Quiet Periods

To ensure fair disclosure of financial information, Advantest stipulates a quiet period that runs from the day

after the closing of each quarter until earnings for that quarter are announced, to prevent information leaks

and to maintain disclosure fairness. During this period, Advantest refrains from answering inquiries about

business performance and related matters. However, material information subject to disclosure rules will be

disclosed in an appropriate and timely fashion, even during quiet periods.

9. Analyst Reports

Advantest will not evaluate or comment on any analyst reports concerning Advantest. However, if a report

contains factual errors relating to past events, those errors may be pointed out.

10. Market Rumors

Our basic policy is not to comment on market rumors. However, in the event a market rumor exerts a

significant influence on the capital markets, or one of the stock exchanges on which Advantest is listed

approaches us for clarification, we will respond appropriately and responsibly.

< I - 2. Capital Structure>

Foreign Shareholding Ratio More than 30%

[Status of Major Shareholders]

Name / Company Name Number of Shares

Owned

Percentag

e (%)

The Master Trust Bank of Japan, Ltd. (trust account) 52,246,100 26.26

Japan Trustee Services Bank, Ltd. (trust account) 23,533,100 11.82

NORTHERN TRUST CO. (AVFC) SUB A/C NON TREATY 6,061,564 3.04

Trust & Custody Services Bank, Ltd. (investment trust account) 5,146,300 2.58

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Japan Trustee Services Bank, Ltd. (trust account 4) 3,889,100 1.95

JP MORGAN CHASE BANK 385151 3,444,942 1.73

Japan Trustee Services Bank, Ltd. (trust account 5) 3,028,400 1.52

STATE STREET BANK WEST CLIENT - TREATY 505234 2,995,200 1.50

SSBTC CLIENT OMNIBUS ACCOUNT 2,376,597 1.19

Japan Trustee Services Bank, Ltd. (trust account 7) 2,317,400 1.16

Controlling Shareholder (except for

Parent Company) -

Parent Company N/A

Supplementary Explanation

In the Report of Possession of Large Volume made available for public inspection, the following companies are

reported as the shareholders, but this has not been taken into account in the above "Status of Major Shareholders",

as Advantest has been unable to confirm the number of shares substantially held as of the end of the fiscal year.

Nomura Securities Co., Ltd. and its two affiliates;

Sumitomo Mitsui Trust Asset Management Co., Ltd. and its one affiliate;

Mitsubishi UFJ Trust Company and its two affiliates;

Baillie Gifford and Company and its one affiliate;

BlackRock Japan Co., Ltd. and its six affiliates;

Daiwa Asset Management Co., Ltd, and

Mizuho Securities, Co., Ltd. and its two affiliates.

< I - 3. Corporate Attributes>

Listed Stock Market and Market Section Tokyo Stock Exchange

First Section

Fiscal Year-End March

Type of Business Electric Appliances

Number of Employees (consolidated) as of

the End of the Previous Fiscal Year More than 1000

Sales (consolidated) as of the End of the

Previous Fiscal Year From ¥100 billion to less than ¥1 trillion

Number of Consolidated Subsidiaries as of

the End of the Previous Fiscal Year From 10 to less than 50

< I - 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with

Controlling Shareholder>

-

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<I - 5. Other Special Circumstances which may have Material Impact on Corporate

Governance>

-

II. Business Management Organization and Other Corporate Governance Systems

regarding Decision-making, Execution of Business, and Oversight in Management

<II - 1. Organizational Composition and Operation>

Organization Form Company with Audit and Supervisory Committee

[Directors]

Maximum Number of Directors

Stipulated in Articles of Incorporation 15

Term of Office Stipulated in Articles of

Incorporation One year

Chairperson of the Board President

Number of Directors 11

Number of Outside Directors 5

Number of Independent Directors 5

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Outside Directors’ Relationship with the Company (1)

Name Attribute Relationship with the Company*

a b c d e f g h i j k

Osamu Karatsu From another

company

Toshimitsu

Urabe

From another

company

Nicholas Benes From another

company

Kouichi Nanba Lawyer

Sayaka Sumida Certified public

accountant

* Categories for “Relationship with the Company”

* ”○” when the director presently falls or has recently fallen under the category;

“△” when the director fell under the category in the past

* “●” when a close relative of the director presently falls or has recently fallen under the category;

“▲”when a close relative of the director fell under the category in the past

a. Executive of the Company or its subsidiaries

b. Non-executive director or executive of a parent company of the Company

c. Executive of a fellow subsidiary company of the Company

d. A party whose major client or supplier is the Company or an executive thereof

e. Major client or supplier of the listed company or an executive thereof

f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or

other property from the Company besides compensation as a director/kansayaku

g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a

legal entity)

h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f)

(the director himself/herself only)

i. Executive of a company, between which and the Company outside directors/kansayaku are mutually

appointed (the director himself/herself only)

j. Executive of a company or organization that receives a donation from the Company (the director

himself/herself only)

k. Others

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Outside Directors’ Relationship with the Company (2)

Name

Membe

rship of

Audit

and

Supervi

sory

Commi

ttee

Designati

on as

Independ

ent

Director

Supplem

entary

Explanati

on of the

Relations

hip

Reasons of Appointment

Osamu

Karatsu

○ Mr. Osamu Karatsu has a wealth of knowledge and

experience as a semiconductor specialist. It will

contribute to the sustainable enhancement of corporate

value of Advantest and the activation of the Board of

Directors to reflect his insights on the industry to which

Advantest belongs in the management of the Advantest

group. Thus, Advantest believes that he is a suitable

person as an outside director.

Toshimitsu

Urabe

○ Mr. Toshimitsu Urabe has extensive management

experience at a leading Japanese general trading

company, particularly overseas experience in the United

States and Asia, experience in business investment

decisions, etc., and extensive experience in

administrative management for example human

resources. It will contribute to the sustainable

enhancement of corporate value of Advantest and the

activation of the Board of Directors as to reflect his

insights on the global management of the Advantest

group. Thus, Advantest believes that he is a suitable

person as an outside director.

Nicholas

Benes

○ Mr. Nicholas Benes has extensive knowledge and

experience about corporate governance matters, and

experience in investment banking including M&A

transactions. It will contribute to the sustainable

enhancement of corporate value of Advantest and the

activation of the Board of Directors to receive his

insights on corporate governance and perspective of

shareholders, and reflect them in the global

management of the Advantest group. Thus, Advantest

believes that he is a suitable person as an outside

director.

16

Name

Membe

rship of

Audit

and

Supervi

sory

Commi

ttee

Designati

on as

Independ

ent

Director

Supplem

entary

Explanati

on of the

Relations

hip

Reasons of Appointment

Kouichi

Nanba

○ ○ Mr. Kouichi Nanba has not been directly involved in the

management of a company in the past, but he has a

wealth of experience and a high level of expertise in

law and compliance, after serving as a judge mainly in

charge of civil cases for many years, and as engaging in

the practice of corporate legal affairs as a lawyer. This

will contribute to the enhancement of the audit and

supervision of the Advantest group as we absorb his

insights and reflect them in the audit and supervision of

the Advantest group. Thus, Advantest believes that he is

a suitable person as an outside director who is an audit

and supervisory committee member.

Sayaka

Sumida

○ ○ Ms. Sayaka Sumida has not been directly involved in

the management of a company in the past, but she has a

wealth of knowledge and experience in finance and

accounting gained through her engagement for many

years in accounting/auditing services and internal

control-related services as a certified public accountant

at an accounting firm. Her insights will contribute to

invigorating the Board of Directors of Advantest and to

the enhancement of the functions of the Audit and

Supervisory Committee. Thus, Advantest believes that

she is a suitable person as an outside director who is an

audit and supervisory committee member.

17

[Audit and Supervisory Committee]

Committee’s Composition and Attributes of Chairperson

All

Committee

Members

Full-time

Members Inside Directors

Outside

Directors Chairperson

Audit and

Supervisory

Committee

3 1 1 2 Inside Director

Appointment of Directors and/or Staff

to Support the Audit and Supervisory

Committee

Appointed

Matters Related to the Independence of Such Directors and/or Staff from Executive Directors

The Audit and Supervisory Committee appoints two employees to support the duty of the Audit and

Supervisory Committee. The personnel matters of Audit and Supervisory Committee support employee

should get prior approval from Audit and Supervisory Committee. The employee who assists the Audit and

Supervisory Committee performs its duties in accordance with the instructions of the Audit and Supervisory

Committee members and ensure independence from Directors and other officers and employees who are not

members of the Audit and Supervisory Committee.

Cooperation among the Audit and Supervisory Committee, Accounting Auditors and Internal Audit

Departments

The Audit and Supervisory Committee collaborates with the Accounting Auditor, the Audit Office and other

internal control departments, and the Audit and Supervisory Board Members of Advantest Group companies to

secure opportunities for exchanging opinions as necessary.

[Voluntary Establishment of Nomination/Remuneration Committee]

Voluntary Establishment of Committee(s) Corresponding to

Nomination Committee or Remuneration Committee Established

18

Committee’s Name, Composition, and Attributes of Chairperson

Committee Corresponding to

Nomination Committee

Committee Corresponding to

Remuneration Committee

Committee’s Name Nomination and Compensation

Committee

Nomination and Compensation

Committee

All Committee Members 3 3

Full-time Members 0 0

Inside Directors 1 1

Outside Directors 2 2

Outside Experts 0 0

Other 0 0

Chairperson Outside Director Outside Director

Supplementary Explanation

Advantest has established the Nomination and Compensation Committee as a non-mandatory organization,

which complements the Board of Directors, to decide appointment/dismissal of Directors and Executive

Officers and their compensation. The Nomination and Compensation Committee is responsible for the

functions of both “the Nomination Committee” and “the Compensation Committee”. The Nomination and

Compensation Committee shall be responsible for improving the fairness, rationality and transparency of

appointment/dismissal of Directors and Executive Officers and their compensation.

The Nomination and Compensation Committee is composed of members selected in members of the Board of

Directors under the resolution of the Board of Directors. To introduce an independent viewpoint, more than a

half of the members are outside directors. The Human Resource Department is its secretariat. In FY 2019, the

Nomination and Compensation Committee met 14 times, and Mr. Yoshiaki Yoshida attended 14 times, Mr.

Toshimitsu Urabe and Mr. Kouichi Nanba attended 10 times, Mr. Seiichi Yoshikawa and Mr. Megumi

Yamamuro attended 4 times. All the members were present in every committee. Attendance numbers vary

since some members are replaced after the general meeting of shareholders. The main discussion agenda of

the Nomination and Compensation Committee is as follows.

- Candidates for Directors and Executive Officers.

- Appropriate level of fixed compensation, performance-linked bonus and stock compensations and their

future scheme

- Positions after retirement for Directors or Executive Officers

- Agreement on the appointment of Directors and Executive Officers

Present members are Mr. Toshimitsu Urabe, Mr. Kouichi Nanba and Mr. Yoshiaki Yoshida. Mr. Toshimitsu

Urabe is the chairperson.

The Nomination and Compensation Committee will recommend persons as candidates to the Board of

19

Directors who will contribute to a sustainable level of business development and enhancement of corporate

value over the mid-to-long term in accordance with the “Directors and Executive Officers

Nomination/Dismissal Policy and Procedures” (*1) prescribed by the Board of Directors regarding Directors

and Executive Officers. In addition, regarding independent outside directors, “Independence Criteria of

Independent Outside Directors” (*2) prescribed by the Board of Directors will also apply in addition to the

“Directors and Executive Officers Nomination/Dismissal Policy and Procedures” mentioned previously.

Candidates recommended to the Board of Directors should have a wealth of knowledge and can be expected to

contribute actively to the Board of Directors. The Board of Directors deliberates proposals from the

Nomination and Compensation Committee, and determines candidates of Directors and appoints Executive

Officers.

When a report on the results of deliberations by the Nomination and Compensation Committee falls under

the dismissal criteria for Directors and/or Executive Officers or if there is a proposal for dismissal from another

Director, the Board of Directors will deliberate.

(*1) “Directors and Executive Officers Nomination/Dismissal Policy and Procedures”: Please refer to the

Principle 3.1 “iv): Board Policies and procedures for the appointment of senior management and the

nomination of director candidates” above.

(*2) “Independence Criteria of Independent Outside Directors”: Please refer to the Principle 4.9 Independence

Standards and Qualification for Independent Directors above.

[Independent Directors]

Number of Independent Directors 5

Matters relating to Independent Directors

Regarding “Independence Criteria of Independent Outside Directors”, please refer to the Principle 4.9

Independence Standards and Qualification for Independent Directors above.

[Incentives]

Incentive Policies for Directors Performance-linked Remuneration / Stock Options

Supplementary Explanation

Regarding performance-linked remuneration, please refer to the “Disclosure of Policy on Determining

Remuneration Amounts and Calculation Methods” below.

Recipients of Stock Options Inside Directors Employee / Subsidiaries’ Directors

Subsidiaries’ Employee / Other

Supplementary Explanation

20

Advantest will grant stock options to Directors or employees who have important roles and responsibilities.

Regarding Directors who are members of the Audit and Supervisory Committee and outside directors, they

are not eligible for grant of stock options and performance based stock remuneration by resolution of the

Ordinary General Meeting of Shareholders held on June 27, 2018.

[Director Remuneration]

Disclosure of Individual Directors’

Remuneration Selected Directors

Supplementary Explanation

Individual disclosure is made in the Annual Financial Report for those with total consolidated compensation

of 100 million yen or more.

Qualified person:

- Mr. Yoshiaki Yoshida:

Total remuneration 149 million Yen (basic remuneration: ¥60 million; cash bonus: ¥51 million; stock

options ¥20 million; performance based stock remuneration: ¥18 million) in FY2019

- Mr. Soichi Tsukakoshi:

Total remuneration 101 million Yen (basic remuneration: ¥41 million; cash bonus: ¥37 million; stock

options ¥11 million; performance based stock remuneration: ¥12 million) in FY2019

- Mr. Hans Juergen Wagner:

Total remuneration 138 million Yen (basic remuneration: ¥67 million; cash bonus: ¥48 million; stock

options ¥11 million; performance based stock remuneration: ¥12 million) in FY2019

*The remuneration of Mr. Hans Juergen Wagner includes that paid by Advantest Europe GmbH.

Policy on Determining Remuneration

Amounts and Calculation Methods Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods

Advantest has established a Nominated Remuneration Committee, which is chaired by an Independent

Director and a majority of its members are Independent Directors, to increase the objectivity and transparency

of Compensation for Directors (excluding Directors who are Audit and Supervisory Committee members) and

Executive Officers. Additionally, “Directors and Executive Officers Compensation Policy and Procedure”

(Please refer to Principle3.1 iii) above) has been approved by the Board of Directors based on the deliberation

and report by the Nomination and Compensation Committee.

Compensation amounts and performance indicators, etc., have been approved by the Board of Directors based

21

on the deliberation and report by the Nomination and Compensation Committee within the total amount of

director compensation, etc.(*4) determined by resolution of the General Meeting of Shareholders and

“Directors and Executive Officers Compensation Policy and Procedure”.

Advantest determines Directors and Executive Officers Compensation to make it effective for a

sustainable level of business development and mid-to-long term enhancement of corporate value, to share

the shareholders' perspective, and to secure and motivate superior human resources. Compensation for

Directors (excluding Directors who are Audit and Supervisory Committee members and Independent

Directors) and Executive Officers is comprised of (1) Fixed-Compensation, (2) Performance-linked

Bonus as a short-term incentive and (3) Stock Compensations as long-term incentive, to contribute for the

purpose written above.

Compensation for Independent Directors is comprised only of (1) fixed-compensation, by considering

their roles and independence from the management.

The Audit and Supervisory Committee deliberates and determines compensation for Directors who are Audit

and Supervisory Committee members within the total amount of the compensation(*3) that is determined by

resolution of the General Meeting of Shareholders.

(1) Fixed-Compensation

Fixed-Compensation is determined at an appropriate level by referring to market data, and position and

responsibilities.

(2) Performance-based Bonuses as short-term incentives

Performance-based Bonuses are calculated based on the consolidated financial results of Net Sales,

Operating Income Ratio, Net Income, and ROE etc. of each fiscal year. Bonuses will not be paid if

Advantest could not achieve 8% of ROE or none of minimum levels of each performance indicator.

Bonuses calculated based on performance indicators are approved by the Board of Directors after they

have been reviewed by the Nomination and Compensation Committee.

(3) Stock Compensations as a long-term incentive

Stock Compensations are comprised of Stock Option (common type) and Performance-based Stock

Remuneration and will be granted after considering Advantest performance trend, economic situations,

stock price in the market and the like.

Stock Options (common type) are rights to gain profit by exercising when the stock price exceeds a

predetermined exercise price. The exercisable period is from 2 years to 5 years after the allocation date.

The vested stocks by Performance-based Stock Remuneration will be fluctuated by the consolidated

financial results of Net Sales, Operating Income Ratio, Net Income, and ROE etc. in three consecutive

fiscal years.

(4) Compensation Ratio

22

The compensation ratio for executive directors is described in the Supplementary Explanation of

[Director Remuneration] above. The ratio of Performance-linked Bonus varies from 0 to 100 depending

on the performance, since the ratio of stock compensation may increase or decrease due to fluctuations in

the stock price or the fair value of options. In addition, Performance-based Stock Remuneration is

fluctuated depending on performance.

(*3) The upper limit of cash compensation of all Directors (excluding Directors who are Audit and

Supervisory Committee members) is JPY600 million per year. The upper limit of cash compensation

of all directors who ware Audit and Supervisory Committee members is JPY100 million yen per year.

The upper limit of performance based stock remuneration is JPY200 million. The upper limit of

stock options is JPY200 million.

[Supporting System for Outside Directors]

At Advantest, the president's office and the general affairs department (Board of Directors secretariat) are in

charge of supporting outside directors. In addition, Advantest provides data and reference materials for Board of

Directors meetings to all the board members by three business days prior, in principle.

Advantest (and/or group-wide) information such as our business execution situation is reported directly to

outside directors from appropriate personnel as necessary.

[Retired presidents/CEOs holding advisory positions (sodanyaku, komon, etc.)]

Information on retired presidents/CEOs holding advisory positions (sodanyaku, komon, etc.)

Name Job title/

position Responsibilities

Employment terms

(Full/part time,

with/without

compensation, etc.)

Date when

former role as

president/

CEO ended

Term

Number of retired presidents/CEOs

holding advisory positions (sodanyaku,

komon, etc.)

0

Others

Advantest does not appoint retired Directors or Executive Officers as advisors. When Advantest determines

that there is a need to utilize the capabilities and knowledge of retired Directors or Executive Officers, we will

entrust the work to them by individual contract rather than in the form of an advisor’s position.

In order to fulfill the management and supervision responsibilities of the Board of Directors, the Board of

23

Directors will make a decision regarding business assignments of post-retirement directors, including former

representative directors. In addition, the president and CEO makes decisions about business assignments after

retirement of executive officers, and report them to the Board of Directors.

As of the filing date of this Report, there are no cases in which work has been entrusted to retired

presidents/CEOs.

<II - 2. Regarding Functions of Business Execution, Auditing, Oversight, Nomination and

Remuneration Decisions (Overview of Current Corporate Governance System)>

Advantest promotes management efficiency by separating the management decision making function and

supervisory function from the function of the execution of operations.

The Board of Directors of Advantest, as the management decision making body, shall make decisions on

significant matters with respect to the management policies and management strategies for Advantest group, and

in its capacity to supervise management, the Board of Directors shall monitor and supervise the status of exercise

of duties by Executive Officers. Advantest strengthens the oversight and supervision functions of the Board

of Directors so as to appoint multiple outside directors as members of the Board of Directors. The Board of

Directors met 14 times in FY2019, Mr. Yoshiaki Yoshida, Mr. Osamu Karatsu, Mr. Hans-Juergen Wagner,

Mr. Soichi Tsukakoshi, Mr. Yuichi Kurita and Ms. Tsuneko Murata attended 14 times, and Mr. Toshimitsu

Urabe, Mr. Nicholas Benes, Mr. Atsushi Fujita and Mr. Kouichi Nanba attended 11 times, Mr. Seiichi

Yoshikawa, Mr. Sae Bum Myung and Mr. Megumi Yamamuro attended 3 times. All the members were

present at every Board of Directors meeting. Attendance numbers vary since some members were replaced

after the general meeting of shareholders. At the Board of Directors meetings, directors with a wealth of

knowledge and experience expressed their opinions from each point of view on the agenda proposed by the

management team, and active discussions took place. The Board of Directors spends about 3 to 5 hours per

meeting, and considers budgets, financial statements, Executive Officer personnel, and acquisition or sales

of businesses etc. The Board of Directors of Advantest (including Directors who are Audit and Supervisory

Committee members) is composed of five executive directors (inside directors), one non-executive director

(inside directors) and five non-executive directors (outside directors) as of the filing date of the Report. Two

of the directors have non-Japanese nationality. One of the directors is female. In order to maintain seamless

communication despite the diversification of Directors, Advantest has arranged for simultaneous

interpretation at the Board of Directors meetings so that Board members can speak freely in both Japanese

and English. Materials and minutes are also translated into English.

Advantest delegates necessary authorities to ensure the prompt and efficient performance of duties.

Advantest’s Managing Executive Officers Committee meets to deliberate important matters that delegates

its authorities. The Managing Executive Officers Committee meeting is held approximately twice a month.

The Managing Executive Officers Committee (Jomukai) is composed of Managing Executive Officers.

Advantest shifted to a Company with Audit and Supervisory Committee on June 24, 2015. The Audit and

Supervisory Committee is composed of one inside director and two outside directors as of June 25, 2020.

Mr. Yuichi Kurita, a member of the Audit and Supervisory Committee member, has many years of

experience in Advantest's corporate planning, financial and administrative officers and Ms. Sayaka Sumida,

a member of the Audit and Supervisory Committee member, has experience in working an accounting

24

firm as a certified public accountant. Both have sufficient knowledge of finance and accounting. Also, Mr.

Kouichi Nanba, a member of the Audit and Supervisory Committee, has abundant experience on legal

affairs.

The Audit and Supervisory Committee audits, based on an audit policy, audit plan and division of duties

formulated by the Audit and Supervisory Committee, the execution of duties by Directors, Executive

Officers and other business executing agencies through collaboration with the Auditing Group and

Accounting Auditors, in addition to its members attending important meetings such as the Board of

Directors, the Managing Executive Officers Committee, the Internal Control Committee, Compliance

Committee, Disclosure Committee, etc. receiving reports on the execution of duties by Directors and

Executive Officers, reading important decision-making materials, and investigating the status of operations

and assets of Advantest and major consolidated subsidiaries in Japan and overseas.

To enhance the effectiveness of auditing and supervisory functions, the Audit and Supervisory Committee

appoints a standing Audit and Supervisory Committee member, while outside directors, who are Audit and

Supervisory Committee members, participate in the Internal Control Committee and on-site audits

conducted by full-time auditors, etc. as necessary to actively audit the status of business execution of

Advantest.

The Audit and Supervisory Committee met 13 times in FY2019, Mr. Yuichi Kurita and Ms. Tsuneko

Murata attended 13 times, Mr. Kouichi Nanba attended 10 times and Mr. Megumi Yamamuro attended 3

times. All the members were present at every Audit and Supervisory Committee meeting. Attendance

numbers vary since some members were replaced after the general meeting of shareholders. The Audit and

Supervisory Committee investigated the status of execution of duties by directors, executive officers, other

business execution organizations and the status of maintenance and operation of the internal control system.

Also, the Audit and Supervisory Committee has an opportunity to exchange opinions with President and

CEO, Outside Directors, and Executive Directors.

The other status is stated in the section on “the Audit and Supervisory Committee” in “the Business

Management Organization and Other Corporate Governance Systems regarding Decision-making,

Execution of Business, and Oversight in Management” above.

With regard to internal auditing, Advantest have established an audit office and several selected internal

employees routinely monitor the operation status of Advantest, as well as identifying problems and making

recommendations for improvement.

Regarding accounting audits, Advantest has audited with Ernst & Young ShinNihon LLC and received

predetermined audits. The certified public accountants who executed Advantest's accounting audit work in fiscal

2019 are Mr. Makoto Usui, Mr. Toshiyuki Matsumoto and Mr. Keiichi Wakimoto. Number of years of all those

auditors continuous audit is within seven years. In addition, assistants performing Advantest's accounting audit

work include those with expert knowledge such as system experts, with CPAs as the main constituents.

Regarding nomination/dismissal and compensation, Advantest has established a Nomination and Compensation

Committee, which is stated in the section on “Voluntary Establishment of Nomination/Remuneration Committee”

in “the Business Management Organization and Other Corporate Governance Systems regarding Decision

25

-making, Execution of Business, and Oversight in Management”.

Advantest has entered into a limited liability agreement pursuant to Article 427, Paragraph 1 of the Companies

Act with each of non-executive Directors. The upper limit of liability based on this agreement is the minimum

liability as provided in the applicable laws and ordinances.

<II - 3. Reasons for Adoption of Current Corporate Governance System>

As a company with an Audit and Supervisory Committee, directors who are Audit and Supervisory Committee

members have voting rights at the Board of Directors, and the auditing and oversight functions of the Board of

Directors are further strengthened. Advantest believes that this will enable us to achieve a sustainable level of

business development and mid-to-long term enhancement of corporate value, and therefore Advantest has

adopted the structure of a company with an Audit and Supervisory Committee.

In addition, a certain number of outsiders are required among the members of the Board of Directors in order to

provide advice and management monitoring and supervision that will lead to the sustainable level of business

development of the Advantest group and mid-to-long term enhancement of corporate value. Therefore, Advantest

has appointed five outside directors.

Furthermore, Advantest has established a system that responds to a rapidly changing business environment, and

has adopted an executive officer system in order to execute business operations swiftly, and has delegated much of

the authority for business execution to Executive Officers and a President.

III. Implementation of Measures for Shareholders and Other Stakeholders

<III - 1. Measures to Vitalize General Shareholder Meetings and Smooth Exercise of Voting

Rights>

Supplementary Explanations

Early Notification of General

Shareholder Meeting

More than 3 weeks before the date of the meeting.

Scheduling AGMs Avoiding the Peak

Day

Avoid confliction of dates to facilitate participation by holding

them 1 to 2 days prior to busy dates

Allowing Electronic Exercise of

Voting Rights

Exercise of voting rights via the Internet from our website

Participation in Electronic Voting

Platform

Advantest participates in the voting rights electronic exercise

platform

Providing Convocation Notice in

English

Convocation notice is available in Japanese and English on our

Corporate website.

Other All reported items at the general meeting of shareholders are

disclosed on our website. Advantest will deliver state of the

general meeting of shareholders.

<III - 2. IR Activities>

Supplementary Explanations

26

Preparation and Publication of

Disclosure Policy

“Basic IR Policy” including disclosure policy is disclosed on our

website.

https://www.advantest.com/investors/management-policy/basic-i

nvestor-relations-policy

Regular Investor Briefings for

Analysts and Institutional Investors

Quarterly financial closing announcement and meeting is

conducted. In order to gain a deeper understanding of our

business trends, Advantest holds business / technology briefing

sessions several times a year.

Regular Investor Briefings for

Overseas Investors

IR roadshow is conducted a few times a year in the US, Europe

and Asia.

Posting of IR Materials on Website https://www.advantest.com/investors

Financial closing announcement, annual report, convocation

notice are disclosed on our website in English and Japanese.

Establishment of Department and/or

Manager in Charge of IR

Corporate Planning Department, IR Section is in charge.

<III - 3. Measures to Ensure Due Respect for Stakeholders>

Supplementary Explanations

Stipulation of Internal Rules for

Respecting the Position of

Stakeholders

Advantest established “basic CSR policy”.

Advantest will strive to respect stakeholders and contribute

toward realizing a sustainable society by harmonizing with

society

Implementation of Environmental

Activities, CSR Activities etc.

CSR activities are actively organized and conducted by

Corporate Communication Division, CSR & Environmental

Affairs Promotion Office

Development of Policies on

Information Provision to

Stakeholders

An “Integrated Annual Report” and “Sustainability Report” are

produced and published every year on Advantest’s website.

From FY2020, we will unify the above two reports.

IV. Matters Related to the Internal Control System

<IV - 1. Basic Views on Internal Control System and the Progress of System Development>

The Board of Directors has established a system that ensures the appropriateness of its business as follows:

Basic Policy for the System to Ensure the Appropriateness of Business

Holding “Enabling Leading-Edge Technologies” as our corporate mission, the Advantest Group established The

Advantest Way that clarifies mission, vision, core values, guiding principle and ethical standards of the Advantest

Group, and has strived to increase the transparency of its management and achieve a sustainable level of business

development and mid-to-long term enhancement of corporate value. To further promote these efforts, the

Company will prepare a framework as described in each paragraph below, implement the establishment,

development and management of the internal control system, and ensure the sound operations of the Company.

27

1. Framework to the effective performance of duties by Board Directors of the Company and the Subsidiaries

(i) The Company promotes management efficiency by separating the management decision making

and supervisory function from the function of the execution of operations. The Board of Directors

shall make management decisions and supervise management. Regarding execution of operations,

executive officers and employees shall execute operations based on the Board of Directors’

clarification of the function and authority of the body executing operations, while delegating

necessary authorities to ensure the prompt and efficient performance of duties.

(ii) The Board of Directors of the Company, as the management decision making body, shall make

decisions on significant matters concerning the execution of business and basic management

policies of Advantest Group, including the Internal Control System, and in its capacity to

supervise management, the Board of Directors shall monitor and supervise execution of duties by

Directors and executive officers.

(iii) The Board of Directors of the Company shall approve the basic management policy of the

Advantest Group, receive reports on business results based on monthly closing account, financial

situation, status of the performance of duties by each department, and review the appropriateness of

such plans.

2. Framework to ensure the compliance with applicable laws and ordinances as well as the articles of

incorporation by directors, executive officers, and employees of the Company and the Subsidiaries in

performing their duties

(i) To ensure compliance with all applicable laws and regulations as well as the articles of

incorporation, and to ensure that actions are taken faithfully and ethically, the Company shall

establish The Advantest Way for all directors, executive officers and employees of the Advantest

Group, and notify such directors, executive officers and employees of these codes. Furthermore, the

Company shall establish the “Code of Ethics for Directors and Executive Officers” for directors

and executive officers.

(ii) The Advantest Group shall establish subcommittees such as the Internal Control Committee, the

Compliance Committee and the Disclosure Committee in order to ensure the appropriateness of

business of Advantest Group.

(iii) The Internal Control Committee shall report to the Board of Directors about the design and

operation of Internal Control System as deemed necessary.

(iv) The Compliance Committee monitors the compliance of laws and regulations and the

implementation of The Advantest Way and report to the Board of Directors as deemed necessary.

(v) The Disclosure Committee oversees the proper disclosure by management and report to the Board

of Directors as deemed necessary.

(vi) The Company establishes a corporate ethics helpline for whistleblowing such that employees can

report behaviors that are illegal or inappropriate in light of applicable laws, Articles of

Incorporation or The Advantest Way. The Company stipulates that the reporter / consultant will not

treat such persons adversely for having reported an incident or sought consultation regarding a

potential violation, and will thoroughly disseminate it.

3. Rules relating to the management of risk of loss and other frameworks of the Company and the Subsidiaries

(i) With respect to potential risks behind management environment, business activities and corporate

assets of Advantest Group, the Company shall identify and classify risk factors for each important

28

business process, analyze the magnitude of risks, possibility of actual occurrence and frequency of

such occurrence, etc., and create written policies and procedures regarding the appropriate response

to and avoidance/ reduction of the risks, as part of the internal control activities.

(ii) With respect to emergency situations such as disasters, the Company shall establish the Risk

Management Group, create written emergency action guidelines and prepare by implementing

education and training programs on a regular base.

(iii) The Internal Control Committee shall thoroughly manage risks of the Advantest Group and report

material risks to the Board of Directors.

(iv) The Company is making efforts to prevent occupational injuries, create a comfortable working

environment, and promote the good health of its employees through the establishment of the Safety

and Health Committee.

4. Framework regarding the retention and management of information with respect to the performance of

duties by Board Directors of the Company

(i) The Company shall properly retain and manage the following information regarding the exercise of

duties by directors, pursuant to the internal rules that stipulate details such as the period of

retention, person in charge of retention and method of retention.

-Minutes of general meetings of shareholders and reference materials

-Minutes of meetings of the Board of Directors and reference materials

-Other important documents regarding the exercise of duties by directors

(ii) The Company shall establish the Information Security Committee that is responsible for protecting

personal information and preventing confidential information from leaking.

5. Framework to ensure the appropriateness of operations of the Company, and the group as a whole, including

its subsidiaries

(i) The Advantest Group shall establish and operate the same quality of internal control system for the

Company and each company of the Advantest Group in order to conduct the consolidated group

management placing an emphasis on business evaluation based on consolidated accounting.

(ii) The internal control system of the Advantest Group is supported by each department of the

Company that is responsible for each group company, and is established and operated as a unified

system based on the policies of the group created by the Internal Control Committee. Significant

matters concerning the status of each group company that is controlled by the Internal Control

Committee shall be reported to the Board of Directors.

(iii) Auditing Group of the Company supervises an internal audit to each group company.

6. Matters relating to employee(s) who assist the Audit and Supervisory Committee

The Company shall establish the Audit and Supervisory Committee and assign the employee(s)

who assist it.

7. Matters relating to the independence of the employee(s) referred to in the preceding Section from Board

Directors of the Company (excluding directors who are Audit and Supervisory Committee members) and

the matters for ensuring the effectiveness of direction to the employee(s)

29

(i) The personnel matters including but not limited to assignment, transfer, performance appraisal and

disciplinary action of the employee(s) referred to in Section 6 shall be subject to a prior consent of

the Audit and Supervisory Committee.

(ii) The Employee(s) referred to in Section 6 shall perform their duties exclusively pursuant to the

instruction and order by directors who are Audit and Supervisory Committee members and their

independence from any officers or employees other than the directors who are Audit and

Supervisory Committee members shall be ensured.

8. Framework for reporting to the Audit and Supervisory Committee of the Company

(i) In the event that any violation or breach of applicable laws, Articles of Incorporation or The

Advantest Way or the fact that could cause serious damage is detected or reported, such evens shall

be reported immediately to the Audit and Supervisory Committee.

(ii) The Company shall adopt a system that allows directors who are Audit and Supervisory Committee

members to attend important meetings such as the meeting of the Board of Managing Executive

Officers and to keep abreast important matters regarding the execution of operations.

(iii) In the event that a report or consultation is made to the Corporate Ethics Helpline, the Company

shall adopt a system that such report or consultation shall be reported immediately to the Audit and

Supervisory Committee.

(iv) Under the provisions of section 8. (i) and (iii), The Company stipulates that the reporter to the

Audit and Supervisory Committee will not treat such persons adversely for having reported an

incident, and will thoroughly disseminate it

9. Other frameworks to ensure the effective implementation of audit by the Audit and Supervisory Committee

(i) The Company shall ensure that the Audit and Supervisory Committee cooperates with the

Accounting Auditors, the Auditing Group (an internal audit division of the Company) and the

corporate auditor of each Advantest Group Company, and that there are opportunities to exchange

opinions with them as deemed necessary.

(ii) The Company shall ensure that there are opportunities to exchange opinions between the Audit and

Supervisory Committee and the Representative Director and shall strive for communication

between them.

(iv) In case that a member of Audit Supervisory Committee requests a prepayment of expense

necessary to perform his or her duties, the Company shall establish a necessary procedure of the

prepayment and execute it without delay in accordance with the designated procedure.

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- Status of implementation of the system to ensure the appropriateness of business

The status of implementation of the system to ensure the appropriateness of business during the fiscal year is as

follows:

(i) Framework for the effective performance of duties

To promote management efficiency, the Board of Directors performs management

decision-making and supervision in accordance with the Board of Directors Regulations and

executive officers and employees execute business in accordance with the Global Organization and

Authorization Rules.

The Board of Directors shall make decisions on significant matters with respect to the

management policies and management strategies for the Advantest group and shall monitor and

oversee execution of duties by executive officers.

(ii) Framework concerning compliance

During this business year, Advantest revised The Advantest Way, which articulates our Mission,

Vision, Core Values, Guiding Principle, and Ethical Standards. Workshops are being held for

officers and employees around the world in order to inculcate The Advantest Way.

In order to enhance compliance, Advantest reorganized the Corporate Ethics Committee as the

Compliance Committee in August 2019. The main activities of the committee include promotion of

compliance activities and provision of education on human rights, as well as provision of

consultation and responses to complaints.

In this business year, Advantest newly established an external contact point for the Corporate

Ethics Helpline and started its operation. At the same time, Advantest explained the Corporate

Ethics Helpline’s role etc. to officers and employees around the world in internal newsletters in

order to ensure thorough recognition of the Helpline. Continued from the previous year,

e-learning-based compliance education was provided to officers and employees and all of the

applicable persons participated in the program.

(iii) Framework for risk management

The Internal Control Committee, chaired by the representative director and attended by outside

directors as observers, identifies and analyzes material risks throughout the Advantest group and

clarifies the departments responsible for individual risks and the policies and procedures for

responses. Moreover, the status of design and operation of internal control systems and significant

results and material deficiencies detected in the course of evaluation of internal controls shall be

reported to the Board of Directors.

Advantest has established a Risk Management Group headed by the representative director to

respond to emergency situations such as natural disasters and epidemics of infectious diseases.

(iv) Framework for retention and management of information

Advantest corporation retains and manages minutes of general meetings of shareholders and

minutes of meetings of the Board of Directors and their reference materials, and important

documents regarding the exercise of duties by directors pursuant to the internal rules. The

Information Security Committee meets monthly and reviews and implements measures to protect

personal information and prevent leakage of confidential information, and maintains and enhances

of security of IT systems.

In this business year, Advantest conducted a simulation drill for dealing with cyberattacks and

alerted all employees whenever phishing emails were received.

(v) Framework to ensure the appropriateness of operations of the Group

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Advantest has defined important business processes of the Advantest group and conducted risk

analysis. Advantest provides instructions to group companies about appropriate responses to those

risks. In this way, Advantest has established internal control systems that are homogeneous within

the group and is operating them. The Internal Control Committee identifies the internal control

status of each important group company based on a control self-assessment (CSA) performed by

the internal audit division and by means of audits performed by the internal audit division, and

provides instructions to group companies to ensure operation in compliance with the policy for

establishment of internal control systems. The Internal Control Committee reports to the Board of

Directors if important matters concerning internal control of group companies come to light.

(vi) Framework for the implementation of audits by the Audit and Supervisory Committee

Advantest has put in place a system whereby a standing audit and supervisory committee member

attends important meetings such as the meeting of the Managing Executive Officers Committee

and keeps abreast of important matters regarding the execution of operations. The Audit and

Supervisory Committee holds meetings with the accounting auditor and the internal audit division,

as necessary, to ensure good communication. Advantest provides opportunities for the

representative director and the Audit and Supervisory Committee to exchange opinions on a

periodic basis or on an as-needed basis in order to ensure good communication.

Advantest has established an Audit and Supervisory Committee Office, to which a full-time

employee who assists the Audit and Supervisory Committee is assigned. The employee who assists

the Audit and Supervisory Committee performs his duties in accordance with instructions from the

audit and supervisory committee members, and thus his independence from directors who are not

audit and supervisory committee members and from other officers and employees is ensured.

<IV - 2. Basic Views on Eliminating Anti-Social Forces>

Advantest has no relationship with anti-social forces such as organized crime groups. Advantest resolutely refuses

requests for purchasing literature, making contributions, payment of membership fees or any kind of approach from

antisocial forces.

The Advantest Way states that "We have absolutely no relationships with antisocial forces and movements, such as

organized crime groups, group that produces such as terrorism and cyber attacks. We will adamantly refuse to

purchase literature from, make contributions or pay membership fees to or comply with any other demands of

antisocial forces and movements.” Advantest strives to thoroughly inform all Directors, Executive Officers and

employees of the Advantest Way.

In the event of contact, unfair demands or obstructive acts by antisocial forces, the General Affairs Department

will become the supervising department and the General Affairs Division will respond as unlawful request

prevention supervisor while cooperating with police and lawyers.

In-house training on corporate ethics explains how to deal with antisocial forces. Advantest also conducts The

Advantest Way review once a year, including the fact that it has no relation to antisocial forces. In addition,

agreements with business partners, such as the basic purchase agreement, incorporate a clause of exclusion of

antisocial forces.

32

V. Other

<V - 1. Adoption of Anti-Takeover Measures>

Adoption of Anti-Takeover Measures Not Adopted

Supplementary Explanation

-

<V - 2. Other Matters Concerning Corporate Governance System>

Advantest conducts disclosure controls to disclose accurately, fairly and in a timely manner the relevant laws

such as the FIEL and "the securities listing regulations" of TSE, etc.

The Disclosure Committee Secretariat has function as disclosure control collects decisions, incidents and

financial information of Advantest and its affiliated companies.

Among the disclosed information, Advantest has established the Disclosure Committee and conducts disclosure

control procedures for regular statutory disclosure documents such as information to be submitted to the KLFB,

and the CEO · CFO evaluate and certify the effectiveness of disclosure control procedures. We further strengthen

these documents, by auditing the financial statements by the independent outside auditors and reviews by outside

legal counsel as necessary.

In the disclosure processes, Information gathered by Disclosure committee secretariat will be decided on a timely

basis by a person in charge of information and disclosed after being approved by the meeting of board of

directors and CEO・CFO depending on content and urgency.

In order to ensure that all important financial information and non-financial information are disclosed in a timely

and appropriate manner, Advantest has formulated "The Advantest Way " which promote corporate activities in

accordance with higher ethical standards, honesty and social justice and is working to ensure thorough corporate

ethics. In addition, in June 2004, we enforced the "Code of Ethics for Directors and Executive Officers" and

clarified that officers take honest and ethical actions. Furthermore, we established the Internal Control Committee

to achieve the four objectives of "business effectiveness and efficiency", "reliability of financial reporting",

"compliance with laws and regulations" and "asset conservation" and strive to maintain and manage internal

control.

With the above, we ensure the appropriateness of disclosure.

33

[Corporate Governance Scheme]

Shareholders’ Meeting

Accounting Auditors Board of Directors

Directors who are not audit and supervisory committee members

Risk Management

Group

Cooperation

Audit and Supervisory

Committee Office

Support

34

[Summary of internal controls and procedures and

financial information gathering and reporting process]

Rep

ortin

g an

d D

isclosu

re pro

cess In

form

ation g

atherin

g

情報収集

Disclosure

Meetings of the Board of Directors

Disclosure Committee Secretariat

Each Div. of Advantest

Corporation

- Decisions

- Incidents

A person in charge of information

Affiliated Companies

- Decisions

- Incidents

Accounting Dept.

Financial

information

Information

CEO / CFO